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Pasture Rental RatesMykel Taylor & Robin Reid
Ag Lenders Conference
September 29‐30, 2015
Pasture Rental RatesMost common question for K‐State Extension◦What is the going rate for pasture (cropland) in my area?
How do we answer this question?◦ Publically available information
◦ USDA‐NASS pasture rent estimates
◦ Bluestem Pasture Report
2014 Pasture Cash Rents
Source: www.nass.usda.gov/Statistics_by_State/Kansas/Publications/County_Estimates/
Historic Pasture Rates for KS
Source: www.nass.usda.gov/Statistics_by_State/Kansas/Publications/Economics_and_Misc/Landval
Bluestem Pasture Report
Year $/acre
2015* 19.18
2013 20.10
… …
2009 18.60
2008 19.00
2007 17.60
2006 17.60
* Includes all native pasture types**Full summer season (combined with and w/out care)
Source: www.nass.usda.gov/Statistics_by_State/Kansas/Publications/Economics_and_Misc/Bluestem/
Bluestem Pasture Report
Pasture Condition % of Acres
2015 2013
Very Poor 1 16
Poor 7 41
Adequate 28 34
Good 46 8
Excellent 17 1
Total % 100 100* Includes all native pasture types**Full summer season (combined with and w/out care)
River Valley District Survey, 2013
Source: www.rivervalley.k‐state.edu/news/kiml‐news‐releases/2014%20RVED%20Lease%20Survey%20Summary.pdf
River Valley District Survey, 2013
Source: www.rivervalley.k‐state.edu/news/kiml‐news‐releases/2014%20RVED%20Lease%20Survey%20Summary.pdf
Pasture Rental RatesPublic data is limited and lagged◦ Next county‐level rent estimates will be in 2016◦ Bluestem pasture report is transitioning◦ County Extension surveys don’t cover the state consistently
Another option we can pursue is to use◦ Pasture‐specific information◦ Operation‐specific costs and production practices◦ Current and expected cattle market prices◦ Put into a decision tool (spreadsheet) and…
Voila!
Pasture Rent ToolPurpose of the tool◦ Get landowners and ranchers to talk
◦ Demonstrate the economic value of good & poor pasture
◦ Avoid fixed cash rents that get out of date quickly
◦ Give both parties an ‘out’ if conditions change mid‐season
Have to change our focus from $/acre◦Move to productivity‐based pricing ($/AUM)
◦ Reward good land management
Pasture Rent Tool: InputsExpected returns◦ Cattle prices (purchase and sell price)
Costs of production◦ Assigned to landowner and tenant
Productivity measures◦ Stocking rates
◦ Productive potential under different rainfall conditions
◦ Look to NRCS
NRCS MLRA Explorer
Source: http://apps.cei.psu.edu/mlra
Pasture Productivity
Range Site Low High Low High Low High
Blue Shale
Chalk Flats
Choppy Sands
Clay Lowland 4,000 5,000 5,000 7,500 7,500 10,000 0.10%
Claypan 1,500 2,000 2,000 3,000 3,000 4,000 4.90%
Clay Terrace
Clay Upland 2,000 2,500 2,500 4,500 4,500 6,000 17.90%
Eroded Red Clay
Flint Ridge 1,000 1,500 1,500 2,200 2,200 3,000 0.20%
Gravelly Hills
Lakebed
Limy Upland 2,000 3,000 3,000 4,000 4,000 5,000 19.10%
Loamy Lowland 5,000 6,000 6,000 8,000 8,000 10,000 5.00%
Loamy Terrace
Loamy Upland 2,500 3,500 3,500 5,000 5,000 6,500 43.10%
Sandy Lowland 4,000 5,500 5,500 6,500 6,500 7,500 0.00%
Shallow Limy 1,000 2,000 2,000 2,500 2,500 3,500 9.70%
Subirrigated
MLRA 76
Unfavorable Normal Favorable
Percent of MLRA
Pasture ProductivityConvert forage needed to acres per head (pair)◦ How much forage is available?
◦What conditions are we facing? (N, F, U)
◦ “Take half, leave half” rule
◦ Harvest efficiency = 25% (e.g. trampled, poop)
Pasture Productivity
Pasture Productivity
Forage Consumed
per Day (lbs)
Total Forage For
Grazing Period
(lbs)
COW/CALF PAIRS 54 8262 Unfavorable Year Normal Year Favorable
Mature Cow Weight 1400 Cow/Calf Pairs 12.2 17.1 22.2
Calf Starting Weight 250 Bulls 0.5 0.7 0.9
Calf Ending Weight 550
BULLS 54 3294 Acres per Cow/Calf Pair & Proportion of Bull 13.1 9.3 7.2
Average Weight 1800
Date In 5/15/2015
Date Out 7/15/2015
# of Cows per Bull 25
Forage Consumed
per Day (lbs)
Total Forage For
Grazing Period
(lbs)
STOCKER CATTLE 20 2984 Stocker Cattle 34.3 48.2 62.3
Starting Weight 550
Ending Weight 750 Acres per Stocker 4.7 3.3 2.6
Ideal Stocking Rate
OR OR
Ideal Stocking Rate
Expected Returns
Grazing Period Start 5/15/2015 Per Head
Grazing Period End 10/15/2015 Beginning Weight (lbs) 550
Grazing Days 153 Beginning Cost ($/cwt) $235.21
Total Acres of Pasture 160 Death Loss 1.00% (12.94)$
Ending Weight (lbs) 750
Growing Season Unfavorable Normal Expected Ending Price ($/cwt) $209.50
# of head 34 48
Acres per Head 4.7 3.3 Net Income per head 264.66$ 2.6
Budgeting for Stocker Cattle Grazing‐Inputs
1,571.25$
Expected Cattle Returns
(1,293.66)$
Favorable
62
Inputs from Stocking Rate Page
Expected Returns
Source: www.beefbasis.com/VOG.aspx
Production Costs
Livestock CostsTotal for Herd
Category: $/head Unfavorable Normal Favorable
Harvested Forage ‐$ per ton x 0 total lbs = $0.00 ‐$ ‐$ ‐$
Grain/Protein Supplements ‐$ per ton x 0 total lbs = $0.00 ‐$ ‐$ ‐$
Mineral 550.00$ per ton x 38.3 total lbs = $10.52 357.64$ 504.90$ 652.16$
Labor (towards cattle) 20.00$ per hour x 1.0 hours = $20.00 820.00$ 960.00$ 1,100.00$
Vet Medicine/Drugs $7.00 238.00$ 336.00$ 434.00$
Marketing $11.00 374.00$ 528.00$ 682.00$
Utilities,Gas, Fuel, Oil $6.00 246.00$ 288.00$ 330.00$
Machinery charge $10.00 410.00$ 480.00$ 550.00$
Cash Interest on Cattle Investment 1,293.66$ purchased cost x 5.0% operating interest $27.11 921.86$ 1,301.45$ 1,681.04$
Miscellaneous $2.00 68.00$ 96.00$ 124.00$
Fixed Overhead Total dollars ‐‐ 612.00$ 612.00$ 612.00$
Taxes 60 Total Costs 4,047.50$ 5,106.35$ 6,165.21$
Insurance 72 Per Head 119.04$ 106.38$ 99.44$
Depreciation 480 Per Head plus beg. Value 1,412.70$ 1,400.04$ 1,393.09$
Production Costs
Source: www.agmanager.info
Landowner Costs
Land Costs
Category:
Water Source Maintenance 1.44 230.40$
Spraying Weeds 6.75$ 1,080.00$
Fertilizer ‐$ ‐$
Burning Pasture 20.00 per acre 3 years = 6.67$ 1,066.67$
Maintaining Fence 6.69$ 1,070.40$
New Fence Construction 3.89$ 621.76$
Corrals 1.03$ 165.00$
Other land costs ‐$ ‐$
Total Costs 26.46$ 4,234.22$
Interest on Land 2,000.00 Land Value per acre 1.0% rent/value r = 20.00$ 3,200.00$
$/acre Total for Pasture
Production CostsBudgeting approach◦ Contributions to costs are calculated on shares
◦ Simulate impacts from changes in lease agreement
Start with state‐level values & adjust for your area◦ Assign labor costs to landowner if they provide care
◦ Add supplemental forage costs
◦ Account for fertilizer costs (tame grass)
◦Weed control and/or burning
Estimated Rental Rates
Estimated Rental Rates
Favorable (62% increase)
Unfavorable (63% decrease)
Normal conditions
Estimated Rental Rates
Important PointsLandowner costs◦ Do not always cover costs, especially when rent is low
◦ Tradeoff of higher management costs and better pasture productivity
Amount tenant can afford to pay◦ Determined by their costs and revenues
◦ Higher when value of gain and amount of gain high
◦ Pasture productivity is valuable
“Afford to Pay”What does this term mean and why do we use it?◦Why not build in a profit margin?
◦ Already paying all costs of production, including labor, interest on capital
If the remainder is pure profit then what happens?◦ Producers will bid away profit in the long run
Returns to Cattle
“Afford to Pay”Profitability is near zero in the long run (stockers)◦ Land rents were stable to slightly increasing for many years
Returns to Cattle ‐ Updated
Pasture RentsDifferent way to approach pasture rent questions◦ Start with assumption that not all pasture is created equal
◦ Gain flexibility from changing range conditions and market prices
◦ Give landowners and tenants a way to estimate the value of good pasture
Push back◦ But what is the going rate!?!
◦ Training for Extension agents, lease workshops
Resourceswww.AgManager.info◦ Farm Management
◦ Livestock Marketing
NRCS◦ Local offices can help you determine your stocking rate
◦Will also assist with a grazing plan
Contact information◦Mykel Taylor: [email protected]
◦ Robin Reid: [email protected]
Pasture Rental RatesMykel Taylor & Robin Reid
Ag Lenders Conference
September 29‐30, 2015
